Building a multi-utility business
A ScottishPower case study

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Page 3: The external environment

Looking at the recent history of developments in the electricity industry, it becomes immediately apparent why ScottishPower has developed its strategy:
Large industrial customers who used over 1MW were able to choose their own electricity supplier. These customers account for around 30% of electricity sales, but include only a very small number of the large industrial firms, such as ICI and British Steel.
Smaller commercial operations, like supermarket stores or hotels, who use over 100kW were able to choose their own electricity supplier.
Domestic customers will be able to choose their own suppliers.

Scottish Power 2 Image 2Given this increasing liberalisation of the electricity market, ScottishPower had to choose a way forward to ensure future growth. The multi-utility idea avoided the problems that the other utilities had experienced when they diversified into areas beyond their core competencies. They found they lacked the management expertise to run businesses that differed profoundly from their own.

This meant that ScottishPower made the move into a range of utility services that tapped existing management skills and expertise, whilst delivering to large numbers of new customers, most of whom prefer to deal with a single supplier for their water/gas/electricity etc. The advantages of this are particularly noticeable in either building a new property (the utility services put in by one company) or for those just having moved home, when a single call can arrange the provision of a range of utility services.

ScottishPower’s strategy

ScottishPower’s strategy has always been driven by striving to be “best in class.” In 1991, ScottishPower undertook a substantial benchmarking exercise by measuring its performance against that of other utility and customer service businesses in the UK and US and by adopting the best, most cost-efficient business practices. Therefore, ScottishPower’s expansion strategy has always hinged on being the best at what it already does, before considering growth opportunities elsewhere.

Strategic planning is concerned with giving an organisation an overall sense of direction and purpose. It is concerned with defining areas the organisation will focus on and how it will channel resources into these areas. It is concerned with the major long-term decisions.

A brief outline of ScottishPower’s strategy is that it is seeking to:

  • Establish ScottishPower as the leading UK electricity producer/supplier - giving customers excellent service at competitive prices.
  • Expand in the UK to provide a range of other utility services.
  • Expanding abroad into electricity supply/ generation/ consultation.

The main costs of implementing this strategy have been the £1.1bn spent on Manweb and £1.67bn on Southern Water.

ScottishPower | Building a multi-utility business